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One star stock are, in general, more volatile than 5 star stocks, so the far end of the spectrum will show far higher 1 year returns for 1 stars than 5 stars. What the CAPS performance graph shows, though, is that 1 stars as a whole underperform 5 stars. It is important to remember that each star rating has >1,000 stocks in it, so the top and bottom .1% will not be indicative of the whole.
Hope that helps,
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